Cattle prices turn on rain; May outlook strong but it's a see-saw no one can trust

The drop this month, which saw the Eastern Young Cattle Indicator lose 10pc in the space of a fortnight, has been put down to an overhang of heavy supply combined with processors exiting the market briefly ahead of short Easter kill weeks.

The dynamics remain in favour of strength in the market: processors are back to recording decent profits, global demand is starting to lift, the potential coming out of the United States is red hot and the season is looking pretty good across most cattle regions.

Analysts and agents say all the signs are for upward, or at the very least stable, prices during May.

However, the way buyer confidence dissipated immediately when prices started to come down has caused a fair bit of concern. This time it wasn't so much vendors looking to offload but rather demand seemed to evaporate overnight.

Cattle Australia chair Garry Edwards said there appeared to be a tendency to either oversupply the market or stop buying "at the first sign of anything negative, which only exacerbates downward price movement."

Agents agreed, saying whether it was El Nino, foot and mouth disease or forecasts of an increased herd size, producers had been extremely reactive in recent times.

"Some of this reaction is very dramatic. We somehow need to get back to a steady hand and longer-term planning and thinking," Mr Edwards said.

The market drop delivered feeder and finished prices that were the softest seen since the horrendous dip at the end of last year.

Episode 3 analyst Matt Dalgleish said some of that was a result of very heavy supply in the first few months of this year, when saleyard throughput at times was 80pc higher than for the same period in 2023.

"With the recovery in pricing, big numbers of animals hit the market," he said.

Mr Dalgleish believes that the fact prices only came off 10pc on average indicates there really is underlying strength in the market.

The big flow of cattle to the yards has now eased, with patchy rain playing some part in that, and buyers seem to be back bidding.

The EYCI has lifted 11 cents a kilogram carcase weight week-on-week to sit today at 580c. It remains 48c below the month-ago value.

StoneX analyst Ripley Atkinson said with cooler temperatures and more rainfall forecast, saleyard supply could keep tightening, providing some short-term upside at the restocker end as producers step in to make use of feed if they don't already have the numbers.

The potential for solid rainfall across Queensland, North West NSW and large parts of the Northern Territory may also affect kill cattle supply leading into short weeks due to access issues or producers choosing to hold onto stock, he said.

One thing to watch out for, Mr Atkinson said, was that finished grid prices for feeders and a rising grain market were challenging feedlot margins for those who haven't consumed their long, expensive 2023 volumes.